Health care subsidies headed for Supreme Court

Tuesday, July 22, 2014 3:43 PM

Two U.S. appeals courts reached opposite conclusions on the legality of a key financing provision of the Patient Protection and Affordable Care Act, increasing the chance of another showdown at the Supreme Court.

An influential federal appeals court ruled this morning that federal subsidies to low-income enrollees of the federal health care exchange, which was established to help people find health insurance coverage as mandated by the law, are unconstitutional.

The decision, if it withstands appeals, may deprive more than half the people who signed up for Obamacare the tax credits they need to buy a health plan,Bloomberg reported.

The way Congress wrote the health care law makes clear that the subsidy is available only to consumers who bought plans on state-run exchanges, according to the ruling.

The law "limits the availability of premium tax credits to state-established exchanges," U.S. Circuit Judge Thomas Griffith wrote.

Later in the day, a federal appeals court in Richmond, Va., upheld the subsidies, saying that although the language of the law is ambiguous, the Internal Revenue Service had the discretion to write rules for the health care law.

The government will immediately seek review of the Washington court's decision, and in the meantime, nothing has changed for people getting premium tax credits, according to Justice Department spokeswoman Emily Pierce,Bloomberg reported.

Iowa is among 15 states that opted to operate its health care exchange under an agreement with the federal government. In all, 34 states refused to create their own exchanges or hewed to the path taken by Iowa.

A report from the Robert Wood Johnson Foundation estimated that 145,000 Iowa residents will have enrolled in the state's hybrid system, with 78,000 people qualifying for subsidies of $396 million.

The ruling can be appealed to the full seven-judge panel of the D.C. appellate court. Regardless, the case is expected to ultimately land before the U.S. Supreme Court.